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Shares of Anadarko Petroleum Corporation (NYSE:APC) are poised to continue to hit new highs as the company benefits from a much more healthy environment for natural gas producers.

While the majority of Anadarko Petroleum Corporation (NYSE:APC)’s production is comprised of liquid energy products (primarily oil), the company is also the third largest US natural gas producer as measured by the Natural Gas Supply Association.

This puts Anadarko Petroleum in a strong position for future growth, as the natural gas market is set to undergo some significant changes over the next few years.

Below are three reasons you should consider adding Anadarko Petroleum Corporation (NYSE:APC) to your portfolio today.

Favorable natural gas price expectations

Over the last several years, natural gas prices in the US have plummeted due to a massive supply glut. New technology allowing producers to extract natural gas from shale rock formations has boosted production across the country. Of course, the laws of supply and demand cause prices to drop whenever there is an oversupply of a commodity.

One of the biggest issues holding local natural gas prices down is the problem with transportation. In North America, the majority of natural gas transportation takes place via a growing network of pipelines that move product from wells to end users.

While US prices for natural gas have remained very low due to the supply glut, international prices have been much higher in areas where there is less supply. The key issue is the difficulty of overseas transportation.

This approval is seen as a landmark decision because it paves the way for other export terminals like this to be built. The Department of Energy appears to believe that the economic benefits of transporting the natural gas outweighs the potential economic detriments of selling our natural gas to other countries.

The transition will take several years before natural gas will be exported in bulk, but the decision opens the gates for higher natural gas prices in the US simply because the supply glut can be eased by selling to other markets.

Over time, the higher domestic natural gas prices will clearly benefit companies like Anadarko Petroleum Corporation (NYSE:APC) that are major producers of natural gas.

Increasing production as prices stabilize

Anadarko Petroleum is poised to increase its energy production by a factor of five to seven percent each year over at least the next seven years.

This production is anchored by the company’s high-margin portfolio of liquids (again, mostly oil), which provide Anadarko Petroleum with a solid base of increasing revenue. But the real growth opportunity comes from the potential for increased natural gas production.

Management has indicated that as prices for natural gas rise above $4.50 (and remain stable above that level), the company will increase its natural gas production. This makes sense because at higher prices, the company can afford to spend more in exploration and production costs to pull more natural gas out of the ground.

As you can see in the chart below (taken from a recent company presentation), a higher natural gas price would allow the company to increase their production to a range of seven to nine percent annualized, which is very strong for a company of Anadarko Petroleum Corporation (NYSE:APC)’s size.

Higher levels of production, coupled with higher selling prices for the natural gas produced will directly affect the company’s net income over the next seven years and beyond.

Rising analyst estimates and higher investor sentiment

The third reason you should consider Anadarko Petroleum for your portfolio is the recent improvement in Wall Street sentiment.

Of course our approach is to analyze investments for long-term growth opportunities (and Anadarko Petroleum fits that profile perfectly). But it certainly doesn’t hurt to own a stock that Wall Street is keen on – and recommending to institutional and individual investors.

Over the past two months, Wall Street analysts have been increasing their estimates for Anadarko Petroleum Corporation (NYSE:APC), based on the company’s strong performance and the strong guidance from management.

The increase in analyst estimates can be a catalyst to send Anadarko Petroleum shares higher as investors begin to realize its strong earnings power.

If US natural gas prices continue their broad advance, these expectations will continue to increase as Anadarko Petroleum captures wider margins and boosts current and future earnings per share.

A year from now, analysts may very well be projecting earnings of $7.00 per share for 2015. This represents a slightly accelerated earnings growth rate as I expect Anadarko Petroleum to increase production due to sustained US natural gas prices above $4.50/Mcf

If investors are willing to pay a growth multiple of 20 times forward earnings, which is reasonable given stronger natural gas pricing and increased production, the stock would rise to roughly $140 in price. This represents more than a 55% increase from Anadarko Petroleum’s current price and may very well wind up being a conservative scenario.